Apartment rents in Los Angeles have declined 6% since the start of the pandemic, according to research from Apartment List. In September alone, rents fell 1.1% in the market. While this is a significant decrease, Los Angeles ranked 11th in the US for its drop in rents.
“As the recession deepens and remote work settles in, many renters have new expectations for what they want out of a home,” Rob Warnock, research associate at Apartment List, tells GlobeSt.com. “Obviously there is a need for cheaper housing, but also a desire for more physical space that might inspire renters to move to more affordable regions or leave the rental market altogether and purchase a home. All of this puts downward pressure on apartment prices in the country’s most expensive regions.”
Los Angeles’ West Coast counterparts San Francisco and Seattle, on the other hand, have experienced more significant decrease in apartment rents. “While there are plenty of technology-driven jobs in Southern California, according to the Census Bureau a smaller share of L.A.’s workforce can work remotely compared to Seattle and San Francisco,” says Warnock. “Therefore the rental market in LA is a bit more physically locked in than theirs are, preventing prices from dropping as much. But keep in mind that on a national scale, L.A.’s price drops are still quite dramatic.
While other major markets on the West Coast are seeing a strong decrease in rents, Los Angeles’ rent tumble trended above the State of California, which saw a 4.6% decline in apartment rents. “Outside the major coastal hubs, California still has many affordable cities where prices are not dropping nearly as quickly (or in some cases, they are still rising),” says Warnock. “For instance, we’ve actually seen rent price appreciation through much of the Central Valley over the course of the pandemic. So at the state-level, those trends will average one another out a bit.”
With the pandemic ongoing, rent decreases should continue through the end of the year. “Because typically the market slows down during the winter and prices drop even if they rose dramatically during the summer months,” says Warnock. “The winter is the “slow” season for the rental market because fewer people move and typically people focus on other types of spending, such as vacations and holidays.”
Apartment List also recently adjusted its methodology recently. The firm still uses a rental analog of a repeat-sales estimator, controlling for composition, but now identifies transacted rent prices, as opposed to the listed or asking rent prices. “We’re constantly looking into ways to improve the rent estimates that we publish,” says Warnock. “In this case, the primary goal was to move away from calculating rents based on list prices and instead look at transacted prices only. Doing so filters out statistical bias that can be introduced when apartments rent for lower than their original asking price, which is particularly common in the current market climate.”